January 11, 2012- The maker of the popular spongy sweet dessert treat Twinkies is preparing to file Chapter 11. Hostess Brands, Inc. is expected to file for bankruptcy protection this week. This will mark the second time the Wonder Bread and Twinkies maker has used court restructuring in the last eight years.
The company is privately held and headquartered in Irving, Texas. It employs over 19,000 and has a debt load of nearly $860 million. Due to the rising cost of labor and prices of flour, sugar and other ingredients, the company has faced a cash flow problem.
The high costs have caused the company to have cash shortfalls and losses despite its annual sales of over $2.5 billion. The company also owes over $50 million to its vendors. The vendors are pressuring for payment due to the recent financial problems the company is facing. The majority of the money owed to vendors is for goods that were provided to the company within the last month.
Hostess was previously known as Bakeries Corp. The company slashed high debt during a previous four-year bankruptcy that started in 2004. However, since February 2009 when the company emerged from the bankruptcy proceedings, it has struggled with finances.
The company has lined up over $75 million in financing to help keep them afloat while they go through the bankruptcy proceedings. Once the company enters bankruptcy court protection, its hopes to reduce its debt and renegotiate contracts with its labor force.